Sainsbury’s has agreed a five-year deal with Microsoft to use the software giant’s artificial intelligence services as part of its cost-cutting strategy.
The strategic partnership will see the supermarket giant employ Microsoft’s AI and machine learning tools to enhance store operations and provide a ‘more efficient and effective service’.
Sainsbury’s said customers will benefit from a ‘more interactive online shopping experience,’ while employees will gain access to real-time data, helping them to speed up the replenishment of shelves.
New deal: Under the five-year strategic partnership, Sainsbury’s intends to employ Microsoft’s AI and machine learning tools to enhance store operations
The grocery chain also said the tie-up would bolster returns for shareholders under its ‘Save and invest to win programme’, and help achieve the goals set out in its Next Level Sainsbury’s strategy.
Launched in February, the plan calls for £1billion of cost reductions over the next three years while investing in technology and automation.
Cost cuts will partly derive from using fewer, but larger depots with more automated robots, which the FTSE 100 company said would lower working capital and double productivity.
Over the same period, Sainsbury’s proposes to boost capital expenditure to between £800million and £850million, and is targeting at least £1.6billion in free cash flow from its retail operations.
It also intends to scale back its general merchandise and clothing offering across some outlets in order to enhance the food ranges available in-store to shoppers.
Since unveiling the strategy, Sainsbury’s released annual results showing its sales rose by 3.4 per cent to £36billion in the year ending March.
The sales growth, which the grocer partly credited to shoppers switching from discounters Aldi and Lidl, helped the company’s profits climb by 1.6 per cent to £701million.
Clodagh Moriarty, chief retail and technology officer at Sainsbury’s, said the Microsoft deal ‘will accelerate our ambition to become the UK’s leading AI-enabled grocer.’
She added that it would help the firm ‘take another big leap forward in efficiency and productivity, continue to provide leading customer service and deliver returns for our shareholders’.
Clare Barclay, chief executive of Microsoft UK, said: ‘Sainsbury’s has laid out a bold vision that puts AI at the heart of its business, accelerating the development of new services, which will enhance and transform the customer and colleague experience.’
Sainsbury’s shares were 1.8 per cent higher at 282.2p on Friday morning.
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